FIRS Sets January 2020 for Online VAT Deduction

• FIRS Sets January 2020 for Online VAT Deduction

The Federal Inland Revenue Service (FIRS) insisted on imposing 5 percent Value Added Tax (VAT) on online transactions despite experts saying it will hurt e-commerce growth in the country.

The Chairman, FIRS, Mr Tunde Fowler, who was attending the African Tax Administration Forum Technical Workshop on VAT, disclosed this in on Monday in Abuja.

Fowler explained that countries and businesses have identified Nigeria as a growing e-commerce market, therefore, it is important to start generating revenue from the sector.

“We have thrown it out to Nigerians. Effective from January 2020, we will ask banks to charge VAT on online transactions, both domestic and international.

“VAT remains the cash cow in most African countries, with an average VAT-to-total tax revenue rate of 31 per cent. This is higher than the Organisation for Economic Cooperation and Development’s average of 20 per cent.

“This statistics, therefore, is a validation of the need for us to streamline the administration of this tax with the full knowledge of its potential contributions to national budgets.

“It is, however, also bearing in mind the rights of our taxpayers,” he said.

According to him, tax is imperative to the economy, especially as a source of funding for capital expenditure in a nation like Nigeria.

“VAT revenue is shared 15 per cent to the Federal Government, 50 per cent to state governments and 35 per cent to local governments.

“FIRS wrote to all commercial banks in May 2018, requesting for a list of companies, partnerships and enterprises with a banking turnover of N1 billion and above.

“This activity is aimed at ascertaining those companies that are compliant with the tax laws and those that are not,” he said.

Since the FIRS first announced its intention to tax online transactions, experts across the nation have said the industry is not ripe enough for such decision as most of these businesses are still raising funds amid huge losses.

Jumia shares have been following since it listed on the New York Stock Exchange in April, other e-commerce sites like Konga are yet to record enough growth to withstand a possible drop in sales as customers are simply expected to start buying from shops or apply for a free prepaid card from the US or UK. The cards are available free online and can be funded easily.

Fowler, however, said the date of commencement is subjected to government approval. We can only hope Buhari won’t approve it comes January 2020.